Growth hacking: A term misunderstood and abused almost as much as religion.
When searching the web for “growth hacking,” you’ll find almost as many explanations and theories as if you Google the “Holy Grail.” Even the highest-ranked pages on Google show definitions which are just plain wrong.
On one website you'll read about growth hacking being a magical fertilizer for business growth. Another will brand growth hacking as a mere buzzword. They may really think it’s a fad. Or they may just be scared of something new that threatens the current status quo, like the Romans nailing a dude to a wooden cross because an entire empire was so scared of his voice.
In this article, I’ll give you my version of what growth hacking is based on my past 5 years working in the field and talking to all kinds of people with different opinions and backgrounds. Though, the biggest learnings definitely came from building a growth team and testing all of it to really find out what works and what doesn’t.
At the end, I’ll tell you the one thing I’m 100% convinced will be the decisive factor if your tech company will win or lose in today's tech-focused world. Some might disagree, but I'm also not Jesus - though I had a long beard once too - but let's jump into it and unveil the Holy Grail!
Growth Hacking is a Mindset
I wondered why so many startups from Silicon Valley are so successful while Europe and the rest of the world has a hard time keeping up. Is it the money or investors? The bad weather in San Francisco?
When you take a closer look at high-growth startups from the past like Paypal, Dropbox, Airbnb, and even newer companies like Miro and Zoom, you’ll find they have one thing in common: the mindset with which they approach a challenge.
This is the mindset of a data-driven and experimental approach while combining this with a deep drill down into the psychology of their users. Add scalability and automation to this mindset and you’ll find yourself in the area of growth hacking.
If you ask me for the simplest definition I would tell you:
“Growth hacking is a new field that combines creative marketing, engineering, and data analytics with a clear focus on scalable user- or business growth, using experimental work approaches to learn and create the desired impact.”
Being part of a high-growth company scaling from 30 to almost 200 employees in a very short time, I had to explain Growth Hacking each week to a group of new hires and quickly learned that it’s best understood with a simple example.
Example: Hotmail - PS: I love you. Get your free email at Hotmail
The year is 1996 and Hotmail was just founded. At this time, free email addresses were not yet common and Hotmail’s user base grew rapidly reaching 20k in a very short period of time. However, the team was running on a low marketing budget and had to figure out how to grow the business in the future. In a discussion with their investor Draper Fisher Jurvetson, they had the idea of putting a line at the end of every email sent out via Hotmail: “PS: I love you. Get your free email at Hotmail'' including a link to the registration page to create your own free email.
This idea was a perfect example of a growth hacking mindset combining marketing, engineering, and data. They turned their own user base into Hotmail advocates by simply using the product and sending emails to friends. This resulted in breaking the 1M user barrier after 6 months, and 12M users after just one year.
Without even knowing and the term “growth hacking” not yet existing, the founders Sabeer Bhatia and Jack Smith pulled off what went into the history books as the very first growth hack. If you’re interested, read more about it here.
No matter if you work in Sales, Marketing, Product, or Engineering, as long as you approach a challenge with the above mindset, you’re acting like a growth hacker. People were doing this before the term even existed, but this behavior/work approach became what we would describe today as a growth hacking mindset.
Growth Hacking is a Tactic & Framework
Once the Growth Hacking mindset is rooted within entire teams and the teams are given some freedom, it shouldn’t take long until they start applying growth hacking tactics to achieve their goals.
Opening Pandora’s box of growth hacking tactics might remind some readers of articles like “The 10 best growth hacks that will make your business successful.” That’s almost as useful as articles like “The 10 things you must do to get a girl on a date with you." It’s the same concept as giving wood as a resource to every business even though one of them is producing chairs and the other one computers.
Tactics are the growth frameworks, structures, processes, and cultures you need to put in place to create a lasting impact and find the levers that lead to your desired exponential growth.
Yes of course, sometimes there are silver bullet stories like Paypal’s referral program, but what you don’t see is what’s happening behind the curtain. It’s like assuming Jesus walked on the water and nailed it right from the first time. But you don't know how many times he probably screwed it up way out in the ocean and barely made it back to the beach like a half-dead Free-Willy gasping for breath before mastering the art of walking on the water.
The Growth Machine
What you need is a real growth machine. A team or several teams with fixed processes to crunch through hypotheses and experiments as fast as possible to learn and find out what really triggers business growth. That way you create lasting impact and maybe experiment number 1,000 will be your silver bullet that will knock your competitors out. Or maybe it will be 200 smaller impactful experiments combined that will leave your competitors behind.
While I can’t explain in a few lines all aspects of how to build a growth machine and will most likely deep dive into this topic in one of my future articles, let me introduce you to some of the most common growth tactics and how to apply them at your company.
Setting goals and set them correctly - The Pirate Metrics
This is one of my favorite frameworks I use to analyze any business. It was introduced by Dave McClure back in 2007 and basically describes the journey of a user when experiencing the product/service you’re selling.
Taking a look at the funnel you see that in a silo-structured organization different departments are responsible for different stages, and some stages are shared or it’s unclear. This is exactly where the magic lies. Analyzing the entire funnel as a whole often unveils issues between departments that no one is aware of, because no one is owning it.
Identifying issues throughout the entire funnel and comparing them against each other will give you the focus for your growth team. This should also be a compass for your entire company to unlock the largest growth levers.
Applying this framework within your teams will build so much more awareness within your company and is often a key differentiator between high-growth companies and organizations that use traditional approaches, which gets them stuck in less impactful part-of-funnel perspectives.
Focus on measurable improvements, not delivery
An important aspect of setting goals is the fact that a goal should always be a measurable achievement which impacts the whole business. Like improving your Weekly Active Users by 10%, and not just delivering features A, B, and C.
It’s like when Hitler sent his army to Africa to search for the Holy Grail. He wouldn’t measure his generals by how many shots were fired, but if they actually got closer to finding the elusive treasure. I’m not actually sure if this is historically accurate, or just a memory of a Wolfenstein game, but it doesn’t matter to make my point. Give your teams metrics that actually impact business success. Don’t tell them how to do it, but trust them in achieving it and you will be surprised by the solutions they come up with.
Achieving your goals - The Growth Hacking Process
After the goal is clear, your teams need a framework on how to work through the quarter or year to achieve it. When a team is not measured by delivery, a normal roadmap wouldn’t make sense.
A tool like “The Growth Hacking Process” is a better fit. In this process, your teams analyze the entire situation, brainstorm, and come up with solutions to get to the desired goal. It’s important that teams don’t double down on one solution, but actually create a variety of experiments.
Experiments are basically the smallest solutions possible built with the least amount of effort. The overall goal is to then launch those experiments to your user- or customer base and see how they perform. Learning from qualitative and quantitative data will then reveal which solutions should take priority moving forward.
This process then repeats itself until the goal is achieved. It does not matter if it takes 5 or 50 experiments. It just matters if the goal is achieved or not.
Equipping your teams with these tools will change how your organization runs and gives you an advantage over any business not leveraging its teams' combined creativity and knowledge.
Focusing on these approaches will also motivate you to restructure your teams more cross-skilled or even change how you structure your entire organization. I touch upon that in a future article, but in the meantime, this golden nugget explains how Spotify completely changed their approach successfully.
Growth Hacking is a Strategy
Alright, let’s close in on that Holy Grail now. When an entire company gains full awareness around modern growth principles, the entire strategy might change, or even better, it is already considered at a company’s inception.
Growth hacking is a strategy because already at the point of designing your product a focus is set around the questions, “How can my product sell itself? How can my product help me acquire more customers through its actual usage?”
We’re entering the space of product-led-growth, an acquisition model that uses the product as the main vehicle to drive acquisition. That means you use your product to automatically acquire new customers without much human involvement. If you manage to add a virality component to your product or not, a key differentiator will be that your acquisition spendings won’t be in direct correlation to your revenue anymore. You will start compounding on your user base and enter exponential growth curves.
While this approach started in the B2C sector, companies like Slack or Zoom managed to use product-led growth to dominate the B2B enterprise market and basically sent a message that this is the new way to win.
I recently attended a webinar with Wes Bush, author of “Product-Led Growth” who showed a very basic, but logical calculation of the Zoom case which I’d like to break down in more detail here.
In only 3 months Zoom grew from 10 million to 200 million daily active users. That’s a 190M difference. Assuming that the average business has 20 employees and they all become daily active users, that would leave us with 9.5M businesses to close (190M / 20). That means in a span of 3 months (including weekends), our sales-people need to do 105,555 demos per day, if we calculate with a 100% close rate for every demo (9.5M / 90 days). If each demo takes 30min and a day has 8 working hours, an employee could do 16 demos a day (8h / 30min). Overall, that means Zoom would need to first hire and then have 6,597 sales-people work for 3 months without break to achieve this growth (105,555 / 16).
While hiring such numbers in a short time already seems very unrealistic, the number becomes even more outrageous when we start tweaking the close rate, demos per day, working days per month, or required sales training. Such simple models clearly demonstrate the advantages of product-led models and can be run for your business too. Give it a try and run the model. Are your business goals achievable by running a sales-led model? If so, how many people will you have to hire?
Now you might be thinking that a product-led approach does not fit all products or markets. I agree that it’s easier in some markets than others. But in the end, product-led growth is not a market focus, it’s a go-to-market strategy and whoever figures it out in your market will have a massive advantage over the rest. People often end up finding themselves in hectic political discussions around sales versus product, but it’s not about that.
If you’re a B2B company, you still need good sales-people to close enterprise deals, but instead of sending Roman soldiers with spears and shields, you equip your sales team with laser pointers and AR goggles so they can do data-driven sales and know exactly where and how to hit. Hence, applying growth hacking at a strategy level might be equally important as deciding what product you want to build.
Growth Hacking can be lived and used on many different levels. But if you are a product company and don’t reach the strategy level to start implementing a real product-led acquisition model, I’m 100% sure you will not win the race.
The company might be successful, but as soon as you have a competitor in your market, maybe even with a worse product than yours, who figured out a product-led-growth approach, this competitor will knock you out. You might see them as a small competitor, but at the point where you realise what’s going on it will already be too late. Your competitor will start profiting from the compounding effects of it’s exponential product-led-growth approach, while you’re still hiring salespeople and doling out more ad spend, while your growth rate flattens the bigger you become.
So is growth hacking the Holy Grail? I’d say no since in the end a product must be truly good for people to buy it. But choosing the right strategy is key, and at the moment product-led-growth companies are excelling over everyone else.
While writing this article I also realized growth hacking is actually much older than I thought. Think about it. Did Jesus talk to millions of people himself to convince them of his ideologies? No. Instead, he created a story and a product: the bible. Actually, that guy was so smart he did not even create the product himself, his disciples wrote it for him. So the product took off and by people using it, the product started to spread itself. Then, sales people were yelling in the streets and sold the product to entire cities and countries so they could make use of it. But that would not have been possible if the product wouldn't have already infiltrated those organizations through a product-led approach.
I always thought Sean Ellis, author of the book “Hacking Growth,” was the godfather of growth hacking, but just came to the realisation that Jesus is actually the biggest growth hacker ever. And he did it all without spending a dime!
I’m spiritual, but not really a religious person, though I think I just won a whole new perspective on religion.
What are your arguments, blockers, or fears that stop you from applying growth hacking within your organization?